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Divergence greeted with enthusiasm

Published Wednesday, November 18th, 2015

There was a time when a rise in the cost of living was greeted with a chorus of disapproval, alarm and political finger pointing. Those days are long gone and been replaced by offerings by central banks to the deity that oversees inflation. Offerings in the form of low interest rates and quantitative easing. The Fed was rewarded yesterday with a CPI increase of 0.2% in October following September‘s 0.2% fall.

In the 12 months to end-October core US CPI has risen by 1.9% which removes another potential obstacle to a December interest rate rise, although inconveniently US industrial production fell for a second consecutive month. Over in Europe the market is assuming that the terror alert will make it more likely that the ECB will press the stimulus button on Dec 3.

The combination of the two equals divergence and a weaker euro giving European shares a boost yesterday with the French stock market +2.8%, German +2.4% and Spanish +2.3%. US stock markets were also performing well until news broke of bomb warnings leading to the cancellation of a football game between Germany and Holland in Hanover and of the diversion of two Air France planes that had taken off from the US to Europe.

to read the rest of the report, please click here

Posted by David Hufton